Secured vs. Unsecured Credit Card
Key Takeaways A secured credit card requires the cardholder to make a security deposit, whereas an unsecured credit card doesn’t require a deposit. A good credit score is not required to be approved for a secured card, but a good credit score will determine your interest rate and other factors for a secured credit card. Both credit cards can be a great tool for building a positive credit history and improving your credit score; each has its advantages and disadvantages. According to the Consumer Financial Protection Bureau, the government agency responsible for protecting consumers’ financial credit interests, more than 175 million Americans have a credit card. Although there is a common basis of what a credit card is, there are as many flavors of credit cards as there are credit cardholders. For example, some cards give points toward hotel stays or airline miles with every purchase. Other cards reward spending with cryptocurrency or contributions to a stock market account. However, one of the biggest differences between credit cards is whether the card is secured or unsecured. What is a Secured Credit Card Secured credit cards were created to enable those with less-than-stellar, limited, or no credit history to obtain a credit card. Although secured cards account for less than one percent of the credit card market, they play a vital role in helping build a positive credit repayment record. Therefore, they serve as an onramp to obtaining an unsecured card. Recommended Read: How Secured Loans Work The security behind a secured card is cold, hard cash. Your cash, that is. A secured card requires a security deposit, typically in the minimum amount of $200, to the bank that issues you the credit card. The cash deposit will then set the lower bounds of your credit limit. So how does it work? First, you must apply and be approved by a credit card issuer. Then, after approval, you deposit a set amount of money for the security deposit to back up the card. So, if your deposit was $200, the issuer will provide you with a credit limit of at least $200. Depending on your credit score and history, the limit could possibly be higher. Benefits of a Secured Credit Card In addition to a secured card giving you access to the flexibility of plastic in an ever-growing cashless economy, it provides these two other important benefits: a lower cost of credit and an easier approval process.Lower Fees Credit rating agencies classify FICO scores of 580 to 669 as ‘fair’ or ‘average.’ Approximately one-third of all Americans have FICO scores that fall within that range. Recommended Read: Tips on How To Improve Your Credit Score At the ‘average’ score level, unsecured credit cards can come with numerous fees, including a one-time fee to open the account, an annual fee for the open account, and a monthly fee to service the account. These fees can leave you paying $150 or more to open the account in year one and an ongoing $100 or more in years two and beyond to continue the account. And, of course, these costs are before you consider any late payment fees, which also tend to be higher. Secured cards, however, typically have no annual fee, or a relatively low one ($35-$50), and no or a minimal monthly maintenance fee. Doesn’t Require a Good Credit Score One of the top advantages of a secured credit card is that your FICO score tends not to significantly influence the credit decision. Why? If you miss a monthly payment towards your balance, the card issuer will apply a portion of your security deposit to cover the payment amount due. While it is possible to obtain an unsecured card with less than perfect credit, fewer options exist for those with FICO scores of less than 580. A must if you have a secured credit card is to make sure you never miss a monthly payment. Therefore, once you have built a record of consistently paying your credit card bill on time, you can ask your card issuer if they offer the opportunity for you to “graduate” with an unsecured card. If you are able to “graduate,” a typical benefit is refunding your deposit and increasing your credit limit. Cons of a Secured Credit Card A secured credit card may be a good option for someone with no or poor credit history. Since your credit score is not a dominant deciding factor for approval of a secured card, a security deposit is required. However, the security deposit can pose a challenge for some who are already struggling to save funds. Additionally, if you default on your credit card, the credit card issuer can take the security deposit that you’ve posted against the card. What is an Unsecured Credit Card Unsecured credit cards are held by 99% of all credit card holders and are generally referred to simply as “credit cards.” Unlike secured cards, an unsecured card does not require a security deposit to back it up. Therefore, the credit card issuer looks closely at your FICO score and other credit history indicators, and repayment ability when deciding on approval or denial of your credit card application. Pros of an Unsecured Credit Card The most significant benefit of an unsecured credit card is access to a 30-day revolving line of credit with no collateral requirements. The line of credit can be valuable for many reasons, such as quickly paying in the case of an emergency or unexpected expense arises. Additionally, unsecured credit cards offer numerous incentives and rewards, such as: sign-up bonuses travel points spending discounts cashback on your card; sometimes as much as five percent 0% percent interest rates during an introductory period; different cards have different time periods, but the introductory period is usually 15 or 18 months 0% percent interest rates offered on balance transfers the ability to borrow cash from the credit card in the form of a cash withdrawal Cons of an Unsecured Credit Card Although there are many benefits, there
Four Ways to Invest in Real Estate for Under $1,000
If you’re looking for a way to invest in real estate but don’t have much money to get started, don’t despair! With a little ingenuity and some careful planning, there are many strategies you can use to launch a profitable portfolio, even on a tight budget. We’ll explore four paths to making smart real estate investments with limited start-up capital. And, by building up your portfolio over time, you’ll be able to gain valuable experience as well as the cash flow needed to realize greater returns down the road. Let’s get started. Short term Rentals Perhaps the easiest way to get started with real estate investment is by becoming a host in your own home and renting out a portion of it, for instance, a spare room or couch. The three biggest benefits of renting out a portion of the roof over your head are: It’s a lot easier than having a full-time roommate, as you control how long someone stays and do not have to worry about rental agreements and eviction procedures You’ll earn more money from a short-term rental than you will from a full-time roommate. As an example, if your rent or mortgage is $1,200 a month for a two-bedroom home, that means that a roommate would pay $600 a month, assuming a 50/50 split. Six hundred dollars a month works out to $20 a day. As there are very few markets indeed where a one-bedroom room can be rented for $20 a day, you will surely earn more renting it out through a temporary stay site, particularly during high-season spikes such as conventions or concerts in your area. You’ll have a lot less wear and tear on your home, as someone staying for a short time— a couple of days or even a couple of weeks— will only have suitcases versus furniture and other trappings of a permanent resident. But that said, there are also trade-offs of getting in the hosting game. Chief among them is that a stranger is living with you, in your own house. Using your bathroom. Lounging on your couch. If visions of this make your heart race or blood pressure rise, then hosting with this level of intimacy might not be for you. A less intrusive form of hosting might be renting out your home when you’re not there. For instance, if you have to be out of town for work, or will be away at a family gathering, that can be a great time to allow someone else to pay a portion of your rent and mortgage. Done right, hosting can be a great method to begin getting hands-on experience as a landlord as well as learn about the real estate markets located elsewhere from your visiting guests. Real Estate Investment Trusts (REITs) A real estate investment trust is similar to a mutual fund. Mutual funds usually invest in just one type of asset— for instance, stocks, bonds, commodities, etc. REITs also invest in one type of asset, in this case, real estate. REITs can be a relatively low-risk vehicle to gain experience with real estate projects because the REIT portfolios themselves are usually diversified— made up of a large volume of properties, across property types (residential, commercial, mixed-use) and geographies. Two big advantages of REITs are returns and liquidity. Returns REITs offer the potential for good returns, in part, because one of the regulatory requirements of a REIT is to pay out 90% or more of its taxable income to shareholders. Liquidity REITs also offer good liquidity because, unlike owning a property, where it could take months to find a buyer and close on the sale, REITs that have a large market of buyers and sellers offer the ability to quickly increase or sell down your investment. As far as disadvantages, the largest one is market risk. Because REITs are investments in the real estate market itself, if real estate prices or rents experience a downturn, the portfolio of the REIT can be likewise affected and see a decrease in returns. Real Estate Crowdfunding Another onramp for accessing real estate investments, particularly very large deals such as the development of a large apartment building or commercial complex, is through real estate crowdfunding. Crowdfunding is a pooled source of money in which multiple individual investors (hundreds or even thousands) buy equity in a commercial real estate project or provide the project with a loan (debt capital in the form of a short-term construction bond, for instance). Opening an account with a real estate crowdfunding platform can be done with as little as ten dollars. Crowdfunding can also give you a peek behind the curtain of commercial real estate development, as a micro hard money lender— something that’s often difficult to see up close without donning a hard hat as a general contractor or developer. Perhaps one of the biggest advantages of participating in crowdfunding is that you can pick and choose the types of projects you invest in. Say for instance, that you’re interested in building up your knowledge about hotel development as you’d like to grow from small Airbnb operator to hotel owner and operator someday. Crowdfunding allows you to pick which investments suit your fancy, rather than requiring that you invest in whatever it is that the portfolio manager selects (the way real estate investment trusts and mutual funds work). For every cup half-full, however, there is always a cup half empty. A disadvantage of real estate crowdfunding is that you are investing in the development of the project from the ground up. If there are construction delays, increased costs or the project is never completed at all, those become your risks to bear, and with it, the potentially adverse impact on your returns. A second disadvantage is that the fees on crowdfunding platforms can be hefty, so research is a must before jumping in with both feet. Vacant Lots and Land Offer Opportunity: Vacant lots and land are often viewed as investments of last resort by
A GUIDE TO 1099 AND OTHER CRITICAL TAX FORMS FOR REAL ESTATE INVESTORS
Real estate investment is one of the most common ways to build wealth. And one of its main draws is that it is a passive activity, meaning that once you’ve made your investment (say, a rental property), the investment makes money for you— while you sleep, while you vacation, and even once you pass it on to loved ones— forever. While the glitz and glam is in finding, buying and collecting income from investment properties (either through flips or through rental income), as many an entertainer and regular-Joe alike will tell you, troubles aplenty can flow from getting the tax-side wrong. Which leads me to the following: My Smart Cousin is NOT a certified public accountant (CPA), tax specialist or tax preparer, and NOTHING in this blog should be considered tax advice or accounting advice. That said, there are some high-level do’s and don’ts we can offer when it comes to the three most commons forms that you will encounter as a real estate investor: form 1099, Schedule E and Schedule C WHAT IS FORM 1099? A 1099 is not one IRS form but rather a collection of forms that report various kinds of payments. The three most common 1099s that you will encounter as a property investor are a 1099-C, a 1099-K and a 1099-NEC. 1099-C If you are buying your first house for the price of a car, and are planning on renovating it and renting it out to someone who receives a housing choice voucher, then the Housing Authority will report the voucher payments, also called Section 8 payments, that were made to you on a 1099-C form. The Housing Authority will send a copy of the 1099-C to you as well as to the IRS, in the same way that your employer sends a W-2 wage both to you and to the IRS. Your tenants will not report the rental payments that they make to you via a 1099-C or on any other tax form. But of course, that makes it no less real— you must self report this income, along with your 1099-C income, as rental income. 1099-K To facilitate the above reporting, effective January 2022, Venmo, Zelle, CashApp and other electronic payment processors, will begin issuing a 1099-K to anyone who receives payments of $600 or more in a calendar year. Thus, if your rental payments are made by your tenants through one of these payment channels, you will need to maintain good records to pinpoint those payments listed on the 1099-K that are rent-related versus those that are not. Payments that your tenants made to you via money or or personal check will not be reported via a 1099-K, though certainly stay-tuned as rules may change in the future. beylikdüzü escort bayan, gaziantep escort, ataköy escort, esenyurt escort, seks hikayesi, kayseri escort, şişli escort, beylikdüzü escort, beylikdüzü escort 1099-NEC As a real estate investor, you undoubtedly will make payments to a property manager, handyman, electrician, plumber, HVAC technician or other service professional that you hire to manage, renovate or repair your property. If these professionals are independent contractors, then you may want to issue them a 1099-NEC form, which will state the amount of money that you paid them, and help ensure that you are able to claim these expenses on your income taxes. Likewise, if you provide property management, general contractor or other professional services to clients, perhaps as a component of your real estate investment business for instance, then you will be issued a 1099-NEC documenting the payments that were made to you. The Schedule E For real estate investors who are also landlords, the most common tax schedule that you will use is the Schedule E. Schedule E is the IRS’s form to report passive income, or income that is not derived from business operations. Schedule E income is generated from activities such as rental properties, royalties (say, from a song, movie or book) or interest in a trust. The Schedule E reports financial information from your rental properties that is part balance sheet and part income statement. On it you will report the properties you own and how much you paid for them (balance sheet type items) and your rental income and maintenance expenses for the property (income statement type items). If you own a property that wasn’t rented out at all (for instance, because it was vacant and in-between tenants, or because it was being renovated), you will still report it on your Schedule E. Likewise, if the property is a multifamily property but only one of the units was rented out during the calendar year, you will report rental income for the one unit. Your accountant or tax preparer can walk you through the ins and outs of what expenses you can deduct and the deductibility limits, but generally, if you’re at least a 10% owner in the rental properties and you call the shots on any big decisions with the property, then you can deduct up to $25,000 of the losses from the rental income. Importantly, Schedule E losses (say, large maintenance expenses from prettying up a new property investment) generally cannot be deducted against 1040 income (say, income from your job or a Schedule C business). Schedule C and Form 1120-S If you establish an ancillary business to your real estate investment business— for instance, property management, lawn care, roof repair, general contractor or other venture— should you choose, you can form a company separate from your real estate investment company. If that separate company is a limited liability company (LLC), you will report the income and expenses for that company on a Schedule C return. If instead the company is formed as a sub chapter S firm, then you will report the income and expenses on form 1120-S. THE BOTTOM LINE Numerous tax forms can potentially apply to real estate investor. Hiring a CPA or tax professional should be job number one to help ensure that you properly report all items, avoid any
THE DEFINITIVE HOME INSPECTION CHECKLIST FOR REAL ESTATE INVESTORS
As any seasoned property investor knows, real estate is a tough business where all that glitters definitely is not gold. This is why the details really matter when taking a look at your first property. Case in point: the property inspection. Aspiring homeowners need little convincing regarding the value of a home inspection, what with the twin requirements of their lender demanding one and their better-judgement knowing they can’t afford to risk their nest egg without one. Investors, however, often stand at the threshold of a property with a false sense of confidence, guided by their ‘instincts’ or ‘gut feeling’ on the potential upside of the deal, which can cloud their ability to spot issues during a walkthrough. There’s no denying that today’s market is red-hot, which, together with an appreciating neighborhood, can cover-up a multitude of sins for a poorly-selected property. Most properties, however, won’t be so lucky to have an upside material enough, especially in the first five to seven years of ownership, to conjure large returns out of thin air on their investment. As such, the condition of the property is crucial, especially during the first 12 to 24 months into ownership when cashflow is thin and expectations are high. Imagine for a minute buying a new home, only to have the roof leak the next day, literally raining on your parade. Or having your tenant point out large ruptures in the wall that you hastily wrote off as ‘settlement cracks’, which now seem to threaten the very foundation. These are the issues that a thorough home inspection can uncover, providing you with a clearer path to returns on your investment. To this end, My Smart Cousin has developed a Definitive Home Inspection Checklist to arm you with your own toolkit for your first or twenty-first home inspections. Before diving into this, let’s understand what a home inspection is, and those areas it should cover. WHAT IS A HOME INSPECTION The word “inspection” may sound invasive and even induce some knee-knocking, but it’s not as frightening as it may seem. A home or property inspection is a physical exam or check-up to gauge the infrastructural soundness of the house. Home inspections work in favor of the property owner to-be, that is, lil’ol’ you, and are particularly important to use when considering houses that are vacant and have sat unoccupied for many years. The home inspection profession is regulated in nearly all states, and licensed in a few. Your first step in selecting a home inspector is to ensure that he or she is licensed and insured. You are able to accomplish this by requesting a copy of the inspector’s license and liability insurance policy for the current year. WHAT INVESTORS SHOULD LOOK FOR IN A HOME INSPECTION Investors should use a home inspection checklist when looking to purchase an investment property, even if the only one doing the inspection is them. With an inspection, you can identify potential problems hiding beneath the surface. Some problems might be minor, say holes in the drywall or doors, while others could require significant repairs and remediation, for instance, extensive mold, flaking lead paint, or exposed asbestos insulation. Grouping issues into major and minor categories can help determine whether there are any issues that are significant enough to walk away from the deal. As mentioned earlier, home inspections serve buyers’ interests and can be a great bargaining tool for investors. If a long list of items doesn’t pass inspection, the prospective buyer can use one, some or all of the items on the list as leverage to negotiate a lower price. This is particularly the case if the investor is working with a motivated seller— a bank or a house that has been listed for months on end. And if the seller doesn’t bite and offer concessions, well, no harm no foul, you can proceed on with the deal if you’re satisfied with it as is. WHAT TO DO WHEN THE INSPECTOR FINDS AN ISSUE Once the inspector completes their inspection, they will provide an inspection report. The inspection report is a crucial part of the home buying process that will likely uncover at least one problem. Minor problems won’t affect your offer much and should be placed in the category of ‘fix-it-yourself’ once you purchase the property. But heavy-hitters affecting the structural integrity of the property will require a conversation or two with the seller. If the seller agrees to accept a reduction to the price or some other trade-off, ensure that the concession is binding by having it enshrined in an agreement that your lawyer prepares. And, of course, if the issue is too extensive or costly to repair, even with a discount, then walking away might prove the better option. Pro Tip: If you are a new investor, your real estate agent and home inspector can be great resources in understanding how bad, or not so bad, things really are. After your home inspection, you’ll receive a comprehensive report numbering some 20 to 40 pages that includes detailed descriptions and images of each item in the house that was inspected. Think of your home inspector as your teacher or mentor when you receive this report— ask the inspector to go through the report with you. Once you sign the report, you’ve essentially agreed that it’s complete and you accept it as-is. As such, now is not the time for bashfulness. Put aside any qualms you have about not wanting to be a bother, and get all of your questions out of the way regarding the report. CONDUCTING AN INSPECTION ON YOUR OWN Self-inspections are the best way to go if you want an affordable home inspection, and the property appears to be in good shape. Properties that are currently occupied with a renter can be good candidates for self-inspection because the house is habitable at some level. A do-it-yourself DIY inspection can also be used if time or money is in short supply. If so, then
Why Real Estate Investors Love Housing Choice Vouchers
Is it good business to rent to Section 8 tenants? At a federal level, the Fair Housing Act does not bar landlords from discriminating based on Section 8– I know, incredible— isn’t fair housing in the very name of the law? But I digress, even if discriminating against Section 8 were not legally permissible (as is the case in several states and municipalities), does renting to Section 8 pencil? Well, let’s follow the money. Corporate America The Housing and Urban Development agency (HUD) conducted a nationwide residential housing finance survey in 2018. HUD found that less than 10% of small landlords (those owning rental houses that have 1-4 units) rent their units to tenants receiving Section 8 while 25% to 30% of large landlords (read, Corporate America— those owning apartment buildings with 100 or more units) rent to Section 8 tenants. Call me cynical, but my money is on corporations and real estate investment trusts having a better understanding of the financial benefits of renting to Section 8 tenants than small-fry landlords. Underserved Communities Tenants who receive housing choice vouchers (Section 8) are concentrated in poor neighborhoods (a problem for another article). The average income of a family receiving a voucher is approximately $15,000. However, families who don’t receive Section 8 often have the same income as their Section 8 neighbors (given a waiting list of as long as 8 years for some communities). Since there is no meaningful difference in the financial stability of the two households, a voucher inherently lessens a tenant’s risk profile. High Income Communities If your investment property is in a tight rental market or high-priced community, HUD takes particular pains (as it should) to enable voucher holders to live and prosper there. As a for instance, in the county of Santa Barbara, CA one of the wealthiest counties in CA, HUD offers first time Section 8 landlords and property managers a signing bonus of $5,000, a bonus of $2,500 for lease renewals, $5,000 in insurance against damage to the unit, $2,000 towards the security deposit, and 24-hour hotline for landlords to call if needed. Answering the question, is it good business to rent to Section 8 tenants? Decidedly so. Recommended Read: How to Pick the Best Mortgage Loan Follow us @mysmartcousin
WHEN SHOULD I CONSIDER HIRING A PROPERTY MANAGEMENT COMPANY?
Whether you are an investor to-be cozying up to the idea of taking the plunge and buying your first house for the price of a car, or you’re a seasoned investor with many owned and flipped properties under your belt, property management is a key element that can’t be overlooked. In short, property management has the capacity to make or break the value of your investment portfolio as well as your success as a landlord. Taking time to dig into the ins and outs of effective property management can save you headaches, not to mention money, down the road. Which raises the question: what exactly does a property manager do, and when should you consider hiring one? Let’s dive in to learn more. WHAT IS A PROPERTY MANAGEMENT COMPANY? A property management firm is a company, a partnership, or sometimes just a single individual, who shoulders the responsibility, via a contract that you, the owner, signs with them, to ensure proper maintenance of your investment home. In the initial flush and excitement of buying a property, it’s easy to minimize the time and flat out inconvenience of maintenance. Until, that is, you get your first middle-of-the-night call or have to drop everything to find a plumber (have both of these scenarios happened to me?— yes and yes). A third party maintenance company serves as the chief point of contact and middleman between you and your tenant on such issues, as well as the the first-responder in addressing your maintenance issues. A second role that the property manager plays is finding tenants, collecting rent, and when required, taking a tenant to court who has not paid rent, for instance, or damaged the unit. Because property managers are often directly or indirectly affiliated with real estate companies, they have significant experience interpreting and applying estate regulations and conducting tenant screening. PROPERTY MANAGEMENT COST In exchange for performing the above roles, property managers are normally paid at least two fees: TASKS PERFORMED BY A PROPERTY MANAGEMENT COMPANY As illustrated above, two of the biggest values that a property management company provides is 1) peace of mind that your investment is managed professionally, and 2) distance between you and your tenant on day-to-day maintenance matters and court disputes. Skilled property managers can save you valuable time and increase your returns by providing the following services: WHEN SHOULD YOU HIRE A PROPERTY MANAGEMENT COMPANY? Hiring a property manager comes with benefit of someone else standing in the shoes of the landlord and the cost of having to pay them to do so. The following scenarios, in particular, are tailor-made for securing property management services post haste: Follow us @mysmartcousinsin
ONE STEP CLOSER TO LEVELING THE PLAYING FIELD FOR RENTERS: ADVOCATES CELEBRATE HOUSE COMMITTEE PASSAGE OF SB 101
WILMINGTON, DE—This afternoon, the House Housing and Community Affairs Committee voted to advance Senate Substitute 1 for Senate Bill 101 (SS1 for SB 101) out of committee and onto the floor for a vote by the full House. SS1 for SB 101 provides the most vulnerable low-income renters a fair shot during eviction proceedings by guaranteeing a right to representation in court for renters who fall below 200% of federal poverty guidelines. “Eviction proceedings, where landlords are usually represented and renters are not, reveal a massive imbalance of power,” said Dan Atkins, executive director of Community Legal Aid Society, Inc. (CLASI). “That imbalance frustrates the very purpose of our court system — the pursuit of justice. The practical implications are profound — too many evictions, families displaced, and communities destabilized.” Since the bill’s introduction in 2021 — sponsored by Senators Townsend and Pinkney and Representatives Minor-Brown, Lambert, and Johnson — advocates have listened to concerns from landlords and lawmakers. Changes to the bill reflect a desire to build consensus, while still keeping a strong bill for renters who will significantly benefit from it. In its current form, SS1 for SB 101: Creates a right to legal representation for renters facing eviction whose household income is lower than 200% of federal poverty guidelines; Places coordination of the program within the Delaware Attorney General’s Office, who will contract with appropriate legal service organizations to provide representation in proceedings covered by the bill; Requires landlords to provide notice of the right to representation at certain designated intervals of a tenancy and in eviction proceedings; and, Creates an Eviction Diversion Program designed to help resolve payment or other issues once a landlord files for eviction. In addition to those benefits, SS1 for SB 101 introduces a post-filing mediation program and mandatory referrals to the Delaware Housing Assistance Program (DEHAP), which creates more opportunities for amicable, quick, and satisfactory resolutions of disputes in ways that keep families housed and landlords paid. Public comment in support of SS1 for SB 101 came from a wide range of stakeholders, including a Delaware landlord. Pam Hill, who owns properties in New Castle County, submitted testimony that read: “To me, passing a bill that secures the right to representation for renters facing eviction is common-sense. It’s not an attack on my rights as a landlord; it’s about ensuring that the rights of my renters are also taken into consideration.” Now that the bill has advanced out of committee, it will go to a full vote on the House Floor, then will need to advance through the Senate one more time before it can go to the Governor’s desk. Advocates hope to see this vote happen soon. “Representatives in the House Housing Committee took an important step toward leveling the playing field between renters and landlords today,” said Javonne Rich, policy and advocacy director at the ACLU of Delaware (ACLU-DE). “We applaud the vote in support of right to representation today, and ask all members of the House to stand up for renters by voting ‘yes’ on SS1 for SB 101 when it comes up for a full floor vote.” The Delaware Right to Representation for Eviction Defense campaign is a partnership between ACLU, ACLU of Delaware, Community Legal Aid Society, Inc., Delaware Coalition Against Domestic Violence, Delaware Volunteer Legal Services, Inc., H.O.M.E.S. Campaign, and Housing Alliance Delaware. More information about the Delaware Right to Representation for Eviction Defense campaign can be found online here: http://aclu-de.org/rtr. Read our Other Blog : A GUIDE TO SHORT-TERM RENTAL OPTIONS FOR YOUR INVESTMENT PROPERTY How to Score an Affordable Investment Property in 2022 Reference : Click Here Follow Us at @MySmartCousin
A GUIDE TO SHORT-TERM RENTAL OPTIONS FOR YOUR INVESTMENT PROPERTY
If you have one or several investment properties that you’ve bought for the price of a car and want added income without building a bathroom, bedroom or finished basement, read on for insights on growing your cashflow in the short-term rental market. WHAT IS A SHORT-TERM RENTAL PROPERTY? A short-term rental property is a property that is rented out for an evening or a couple of days to a few weeks or months. In short, anything rented out for less than a year under an annual lease is viewed as short-term. The types of properties that can be rented out short term come in many flavors including: your home sweet home a tiny house or cottage that you place, either temporarily or permanently, in your backyard or a side lot next to your home a single family investment property a small multifamily investment property of 2-4 units an entire apartment building bought solely for the purpose of short-term rentals ADVANTAGES OF A SHORT TERM RENTAL INVESTMENT PROPERTY Short term rentals can provide you with increased cashflow on the revenue, expense and personal budget fronts, giving your pockets a wonderful case of the mumps. Your Own Vacation Getaway: If your investment property is located in a city that you frequent for vacations, family reunions or get-togethers, then a short-term rental can save you money by avoiding hotel costs, and generate income when you’re not using it. Also, having a vacation rental that you own makes it easier to block off vacation timeframes that work for you. Fewer maintenance headaches: Short term rentals are subject to less wear and tear than year-round rentals because: 1) they’re occupied in only short bursts of time (for instance, an evening or weekend), 2) the unit is furnished so there’s no wear and tear from furniture or other large belonging being moved to and from, and 3) the damage deposit for a short-term rental of a couple of hundred dollars usually invites a greater level of precaution from visitors than a long-term rental might. Additionally, because of the gaps between guests visits, repairs and minor cosmetic work can be done quickly before any issues turn into a more expensive problem. Higher overall monthly rental income: The daily rate for a short term rental is higher than the equivalent daily rate for a monthly rental. As an example, the average monthly rent for a 3-bedroom, 1-bathroom house in New Jersey is $1,800, which translates into an equivalent daily rent rate of $60 over a 30-day period. The average short-term rental rate for a 3-bedroom, 1-bath house in New Jersey is more than twice this amount, or $130-$150 a day. Although your investment property will certainly have some level of vacancy, over the long-term, your short-term rental will out-earn its long-term peers. Real-time Price Adjustments: A long-term rental under an annual lease offers the ability to adjust prices only once per year. Additionally, depending on the state and tenant population, the annual increase amount might be capped. In contrast, short-term rental investors can adjust their prices after each and every occupant, based on market conditions and opportunities. Thus, if a concert or sporting event is coming to your area on a particular weekend, you can raise the price for your rental unit based on the increased demand. DISADVANTAGES OF SHORT TERM RENTAL INVESTMENT PROPERTY Of course, as with most investments, there are always downsides that should be discussed. Short-term rentals will require more day-to-day involvement than annual rentals in terms of marketing and communicating with the revolving door of guests you will have. As such, before diving headfirst into short-term rentals the moment your annual leases expire, consider the challenges that come with this territory: Edging out Competition: In order to minimize vacancies and negative reviews, short-term rental landlords will need to consider as competition both short-term rental properties as well as commercial properties like inns, long-term stay hotels and conventional hotels. Investing both money and time on well-appointed furnishings will pay dividends in the short-term market more so than for long-term, unfurnished annual leases. Likewise, promotional discounts and other marketing sizzle will be required to keep your property top-of-mind with potential guests. Maintenance and Repairs: While renting out your property or a room in your house to a new guest each week may result in less overall wear and tear versus an annual rental, the frequent in and outs mean lots of mini and ongoing housekeeping on your end. If you are serving as the head handyman and housekeeper for your short-term rental business, this translates into a never-ending list of chores, honey-do’s and home repair purchases. Off-Peak Vacancies: Just as you factor in a vacancy rate for a traditional real estate investment property, you will need to price in the cost of vacancies for a short-term rental property. Do your homework to find out when vacation travel is down in your area and adjust your pricing and offerings accordingly. Alternatively, schedule large maintenance and capital improvement projects during off-season. Property Management: In many ways a short-term rental is like a traditional rental property that is located out of state. Both will require the use of a capable property manager to screen and choose tenants, address repairs and collect rent. Because of the added work, however, a short-term rental will attract property management fees that are significantly higher, from a low of 10% of the rent to a high of 50%, vs. a long-term rental where property management fees range from a low of 5% to a high of 15%. This added cost will need to be priced into the value of the short-term rental opportunity. HOW TO MAXIMIZE YOUR PROFITS WITH SHORT-TERM RENTAL PROPERTIES Short-term rental properties will provide returns throughout the year, but as discussed above, a more active engagement strategy is required. LOCATION AND CONDITION OF THE PROPERTY – The largest driver of profitability, more so than with long-term rentals, will be the location of the property because of it serving as a vacation residence for guests. Inspecting your property from the vantage point of guest will help ensure that
SHOULD A REAL ESTATE INVESTOR OBTAIN A REAL ESTATE LICENSE?
Real estate, even in today’s hot market, offers the opportunity to buy a house for the price of a car, both for new and seasoned investors alike. The decision to buy, rehab and rent or buy, rehab and sell often comes down to market conditions. Which raises the question of whether a real estate license is required or provides an edge in assessing market conditions and becoming a successful investor. A REAL ESTATE AGENT OR A REAL ESTATE INVESTOR? First, to the question of requirements: real estate investors are nonrequired to become or to be licensed as real estate agents. While some real estate agents invest in properties and property-related businesses such as property management, and some real estate investors sell property as agents, the two are separate activities, and the pursuit of one does not require engagement in the other. That said, obtaining a real agent license offers certain advantages and can serve as an asset for real estate investors. Deciding on whether to pursue a real estate license should not be considered lightly as a significant time investment is required along with licensing costs. To help better inform your decision, let’s take a look at the pros and cons of pursuing a real estate license. BENEFITS OF OBTAINING A REAL ESTATE LICENSE One of the biggest advantages of a real estate license is instantaneous and comprehensive access to information on upcoming and sold properties. If your goal is to spend significant time researching, buying and selling properties, not just on behalf of your own portfolio but on behalf of others, then obtaining a real estate license will serve you well. Likewise, if you intend to amass a significant investment portfolio or plan on selling a number of properties through the services of a real estate company, then representing yourself in these transactions as a licensed real estate agent may offer advantages, particularly in terms of the commissions that will no longer have to be paid to a third-party selling agent. Real estate licenses are issued state by state, with some states allowing holders of a license in another state to qualify to buy and sell property in their state through reciprocity provisions. As such, if you have or intend to build a multi-state real estate portfolio or real estate agency, the requirement for multiple real estate licenses and availability of reciprocity should be weighed. ACCESS TO MLS- THE MULTIPLE LISTING SERVICE: As mentioned earlier, the biggest advantage of becoming a licensed real estate agent is access to the MLS (Multiple Listing Service): Particularly in a hot market, receiving immediate notifications of new sales listings can provide an edge in getting ahead of investment competition. The MLS system also speeds your research, offering detailed information about recent sales, fast-selling neighborhoods, popular home types and comparable properties without having to check multiple sites. INCREASED INDUSTRY KNOWLEDGE: Another advantage of becoming a real estate agent is firsthand introductions to appraisers, title companies, lenders, inspectors and other key players in the real estate industry. This exposure increased your expertise in the many facets of the real estate process. Additionally, directly working with lenders and appraisers improves your negotiating position and assists in reaching quick settlement on terms and conditions. GET PAID TO BUY AND SELL YOUR OWN PROPERTIES: By becoming your own agent and representing yourself as the buying or selling agent, you can receive the buying agent’s commission when you buy a property for your portfolio, and likewise the selling agent’s commission when you sell a property. As an example, if you buy a property that has a standard 6% commission, a commission of $12,000 would be paid to the selling agent, who would then split it, 50/50 with the buying agent. Since you’re representing yourself as the buying agent, you receive the $6,000 commission, effectively lowering the purchasing cost for you for the house from $200,000 to $194,000. EXPANDED CONNECTIONS: As a real estate agent, you will work under a licensed real estate brokerage firm. The relationships you form with other agents at your brokerage will yield tips and lessons about the market. Additionally, through your colleagues you will build a strong network that helps you find and close good deals quickly and gain intelligence on recently-visited properties. DRAWBACKS OF A REAL ESTATE LICENSE While becoming a real estate agent offers many advantages, it is not without its challenges, especially for beginners. DIFFICULT TO ACQUIRE: Obtaining a real estate license requires a time investment on the order of 4 – 8 months for most in terms of classes, exams, applications and background checks. While the required courses differ from state to state, they generally cover topics including fair housing laws, ethical standards, real estate practices and record-keeping. In addition to time, an investment of a few hundred dollars to a couple of thousand dollars is required to obtain a license, along with ongoing investments icon continuing education and license renewal. TIME COMMITMENT: Once a license is in hand, it can take new agents several months before they obtain their first client or close their first deal. Marketing, advertising, showing and helping to stage homes can take many hours a week, all of which takes time away from searching for investment properties. MUST ENSURE NO CONFLICT OF INTEREST: Real estate agents have a legal obligation to prioritize the interests of their clients. As such, agents must ensure that they act in the ethical interests of their clients and disclose any conflicts of interests, such as if an agent is selling their own investment property to a buyer that the agent represents. A conflict of interest could lead to a lawsuit and/or penalties and damages. As such, it is crucial that agents who are also investors ensure that no conflict of interest, perceived or actual, occurs. Read my other Blogs: Click Here Follow Us at: @MySmartCousin
What’s the Difference Between Fix & Flip Hard-Money Loan and a Conventional Loan?
Whether you’ve bought your house for the price of a car or paid several hundred thousand dollars for it, becoming a brand new homeowner makes you feel like a million bucks. Becoming a real estate investor, once the province of the rich and famous, has opened up to the every-man, with dozens of avenues for getting a toehold as a buy-and-hold or buy-and-flip property owner. But first, a few definitions. What Exactly is a Fix & Flip Investment? The term ‘Fix& Flip’ real estate gained traction in everyday vocabulary beginning in the late 1980s. In the grip of an economic recession and surging home foreclosures (repeated 20 years later with the Great Recession), investors bought, rehabbed, and sold foreclosed properties, thus birthing the notion of ‘flipping’ or improving and selling a property quickly as a normal business practice. Properties ripe for fix & flip are those that offer a large and quick payoff potential. For instance, a house that is structurally sound but several years past its prime on the paint, flooring, appliance, and overall maintenance fronts. Such a house that requires a maintenance overhaul but isn’t a complete gut-job offers two key benefits. First is that the house can be improved quickly— a quick turnaround minimizes the risk that as weeks turn to months, the housing market suddenly sours. Second is that a maintenance overhaul, while expensive, costs tens of thousands of dollars less than a gut job, as major overhauls almost always involve a brand new roof and heating/ventilation system along with significant wiring and plumbing upgrades. Best Sources for Fix & Flips One strategy that is growing in popularity is purchasing a property that is old, under-maintained, or abandoned, followed by renovating it and then renting it out, either as a long-term rental or as a short-term Airbnb. Four Big Differences Between Hard Money Loans and Conventional Loans One way to differentiate hard money loans from conventional loans is to think about their purpose. Conventional loans are taken out to finance the residence that you will live in a long time— your primary residence. As such, the duration of a conventional loan is typically 15 years or 30 years, and the interest rate is relatively low as lenders believe that you are likely to prioritize payment of bills relating to your home-sweet home. Conversely, Fix & Flip loans are short-term in nature, funded by investors who expect a quick profit realized within months or a handful of years. Likewise, particularly for fix & flip investments, the ownership horizon itself will only be months or a year or so until the property is sold at its now higher, rehabbed value. beylikdüzü escort bayan, gaziantep escort, ataköy escort, esenyurt escort, seks hikayesi, kayseri escort, şişli escort, beylikdüzü escort, beylikdüzü escort A second difference is who the lender is. Conventional loans are generally provided or guaranteed by government-backed mortgage lenders such as Fannie Mae and Freddie Mac. Fix & Flip or hard money loans, however, receive no such cushion and are backed strictly by individuals or private sector entities. And each lender provides its unique set of benefits and trade-offs. Conventional mortgages are long-term and low-priced but require reasonably strong personal credit. Hard money loans can be provided quickly with no credit check but must be repaid quickly and at a relatively high-interest rate. A third difference is the eligibility requirement. All financial good deeds and skeletons alike come tumbling out when a conventional loan is provided, due to the stringent regulations and requirements that banks must abide by. Private money lenders face few restrictions and thus are not required to validate your creditworthiness. Their chief concern will be the value of the property that is securing the loan. Lastly is the time to complete the loan process. Conventional loans may take one to three months to complete, while fix & flip loans can be wrapped up in a few days. Read our other blogs: Click Here Follow us: MySmartCousin